Investing Wisdom from the Greats

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As you read this, I’m somewhere in Tennessee, on a trek from Nashville to the Great Smoky Mountains National Park. In light of that, I’m going to keep this short and sweet.

I’ve always been a big fan of quotes and working at Cabot has given me some new (investing-themed) favorites. One, which is inscribed on our office mantel, says “Markets are never wrong; opinions are.” This bit of market wisdom comes from Jesse L. Livermore, a trader famous for making and losing several million-dollar fortunes in his lifetime and providing us with the lessons he learned in “Reminiscences of a Stock Operator,” originally published in 1923.

Today, I’m going to share some quotes from the world’s most famous investors. Please write in to share your favorite if it doesn’t appear on this list; I might print it in a future column.

“When reward is at its pinnacle, risk is near at hand.”–John (Jack) Bogle, founder of the Vanguard Group.

“Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.”–Warren Buffett, the Oracle of Omaha and the third richest man in the world.

“Psychology is probably the most important factor in the market–and one that is least understood.”–David Dreman, a contrarian investor and author.

“I don’t want a lot of good investments; I want a few outstanding ones.”–Philip A. Fisher, growth investor and author of “Common Stocks and Uncommon Profits.”

“Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.”–Benjamin Graham, the Father of Value Investing and author of “Security Analysis” and “The Intelligent Investor.”

“If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them.”–Peter Lynch, managed Fidelity Magellan Fund from 1977 to 1990, beating the S&P 500 Index in 11 of those 13 years, achieving an annual return of 29%.

“Successful stocks don’t tell you when to sell. When you feel like bragging, it’s probably time to sell.”–John Neff, averaged annual total return of 13.7% (versus S&P 500’s 10.6%) while managing Vanguard’s Windsor Fund from 1964 to 1995.

“Since the market tends to go in the opposite direction of what the majority of people think, I would say 95% of all these people you hear on TV shows are giving you their personal opinion. And personal opinions are almost always worthless … facts and markets are far more reliable.”–William J. O’Neil, growth stock investor, CANSLIM author and founder of Investor’s Business Daily.

“Change is the investor’s only certainty.”–Thomas Rowe Price Jr., growth stock investor and found of T. Rowe Price investment firm.

“Most leading stocks cannot spare the time and money to research smaller stocks. You are therefore more likely to find a bargain in this relatively underexploited area of the stock market,”–Julian Robertson, has the best hedge fund record during the 1980s and 1990s, with a compound rate of return of 32%.

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much money you lose when you’re wrong.”–George Soros, ran the Quantum Fund, which generated an average annual return of more than 30%.

“Invest at the point of maximum pessimism.”–John Templeton, of the Templeton investment funds. In 1939, he famously bought $100 of every stock trading below $1 on the New York and American stock exchanges, totaling 104 stocks, of which 34 went bankrupt. He invested a total of $10,400 and sold four years later for more than $40,000.

That’s all for today. As I said above, please send in your favorite bit of investing wisdom. I’d love to add it to my own collection and share it with your fellow Cabot Wealth Advisory readers in a future issue.

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Timing is Everything

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On Thursday, Cabot Market Letter and Cabot Top Ten Report Editor Michael Cintolo describes three points that will help you improve your results both during this downturn and, especially, when the bulls re-take control:

1) Track your results so you can learn from your stock trading, 2) Define the investing style that suits your personality, and 3) Use both offensive and defensive selling tools.

Cabot Wealth Advisories

We designed Cabot Prime for dedicated investors like you—investors who want to own the best stocks, collect the biggest profits, and lock in a rising source of income for life. With Prime membership, you get full access to nine of our top advisories and many members-only benefits, including free admission to our annual Investors Summit.

Cabot Benjamin Graham Value Investor uses the methods developed by the father of value investing, Benjamin Graham, and popularized by Warren Buffet. A system that works well in all markets, it buys stocks when they're dirt cheap, and sells when they've reached full valuation, a process that takes two years for the average selection. What's important here is buying only when a stock's price is below its Maximum Buy Price, holding through thick and thin, regardless of the news or the action of the stock, and then selling when the stock reaches its Minimum Buy Price. These are great stocks to own if you're a conservative stock investor. Chief Analyst J. Royden Ward explains clearly how to build a portfolio of stocks that meet his strict requirements-plus every issue includes updated rankings on his "Top 275 Value Stocks," so you can check on other stocks you may own.

Cabot Dividend Investor focuses on preparing for retirement, recommending a solid range of income-generating stocks, preferred stocks, REITs, MLPs, closed end funds and utilities, with particular emphasis on risk, dividend safety and dividend growth. If you’re retired or thinking about retirement, this advisory is designed for you. Cabot Dividend Investor’s proprietary Individual Retirement Income System (IRIS) will help you allocate your assets for capital appreciation, current income, growth and future income investments according to your retirement goals.

Cabot Emerging Markets Investor focuses on the emerging markets economies, with special attention paid to the BRIC (Brazil, Russia, India and China) investment landscape. You'll discover the value of international diversification and the profit potential of investing in countries whose economies are growing far faster than that of the U.S. All these stocks are traded on U.S. exchanges, usually as American Depositary Receipts. Under the guidance of Chief Analyst Paul Goodwin, Cabot Emerging Markets Investor was recognized as the top investment newsletter in 2006 and 2007 by Hulbert Financial Digest, and was rated by Hulbert as one of the top investment newsletters in every five-year period 2004 to 2011.

This flagship investment advisory has been published since 1970 and it is recommended for all investors seeking to grow their wealth. You’ll receive invaluable investing lessons, so that you won’t just become a more successful investor—you’ll become a wiser investor!

Cabot Options Trader’s Chief Analyst and options expert Jacob Mintz uses calls, puts and covered calls to guide investors to quick profits while always controlling risk. Beginners and experts alike can benefit from following Jacob’s advice. Whenever Jacob determines the time is right, he sends specific option buy and sell alerts via email and text-message for immediate action. He also sends out a weekly update with his views on the options market, open option positions and his outlook for the coming week.

Cabot Options Trader Pro’s Chief Analyst and options expert Jacob Mintz uses the full spectrum of option strategies to recommend the option that best suits the trade opportunity—calls, puts, spreads, straddles, iron condors and more—while always controlling risk. Whenever Jacob determines the time is right, he sends specific option buy and sell alerts via email and text-message for immediate action. He also sends out a weekly update with his views on the options market, open option positions and his outlook for the coming week.

Cabot Small-Cap Confidential is a limited-circulation advisory for investors seeking profit opportunities in high-potential small company stocks. Each month, small-cap expert and Chief Analyst Tyler Laundon features in-depth research on one outstanding small-company stock that is a pioneer in its field and undiscovered by institutional analysts. Updates on all recommended stocks are sent weekly. The circulation of Cabot Small-Cap Confidential is strictly limited because the stocks recommended are often low-priced and thinly traded. In the publication’s first five years, spanning 2007-2012, the average stock recommendation gained 30.5%.

Cabot Stock of the Week offers the very best of all Cabot stocks across the investing spectrum. Each stock is personally selected by Cabot’s President and most Senior Analyst Timothy Lutts, and guided by the collective wisdom of all the Cabot expert analysts. As a subscriber of Cabot Stock of the Week, you’ll build your wealth and reduce your risk with the single best stock each week for current market conditions among growth, momentum, emerging markets, value, dividend and small-cap stocks.

Designed for experienced investors, Cabot Top Ten Trader is your ticket to fast profits in stocks that are under accumulation now. Every Monday you’ll receive a one-page profile of each recommended stock, including fundamental analysis, technical analysis and buy ranges. Plus... each Friday, Chief Analyst Michael Cintolo will give you an update titled "Movers & Shakers," so you’ll always know his latest thoughts on these fast-moving stocks. Cabot Top Ten Trader is your best source of advice on investing in the market’s hottest stocks.

Yes, you can have Growth AND Value! Combining both growth and value in her growth-at-a-reasonable price strategy, Chief Analyst Crista Huff uncovers stocks with strong growth catalysts that are selling at attractive valuations—the stocks that are temporarily overlooked by mainstream analysts and institutions. Crista applies her stringent screens to deliver the best stocks in three portfolios: Growth, Growth & Income, and Buy Low Opportunities. A subscription includes monthly issues with weekly updates, special bulletins with market and stock alerts and email access to Crista.

Wall Street’s Best Dividend Stocks presents the best income investments from the top Wall Street analysts, researchers and advisors. Editor Nancy Zambell scours more than 200 advisories and research reports to select the top recommendations. Dividend recommendations include high yield, growth and income, REITs, mutual funds, ETFs and more. One Spotlight Stock is featured each month, along with Nancy’s insight on the market and updates on past recommendations. One top recommendation arrives in your email box each morning, and then gets collected into an easy-to-read digest of 30 to 35 top recommendations each month.

Editor Nancy Zambell scours more than 200 advisories and research reports to select the top recommendations by the top analysts. Selections run the full range of opportunities: growth stocks, value stocks, technology, small-caps, biotech, pharmaceuticals, mutual funds, ETFs and more. One Spotlight Stock is featured each month, along with Nancy’s insight on the market and updates on past recommendations. Thirty-plus recommendations are delivered to you in Daily Alerts directly to your email box, and collected in an easy to read digest each month.

Reviews

"Over the last few years, Cabot's China & Emerging Markets Report has racked up one of the most remarkable records ever recorded by the Hulbert Financial Digest."

-Peter Brimelow, MarketWatch 10/4/09

Market Update

From Cabot Top Ten Trader

The overall market is still in good shape, but growth stocks have been acting funky for a couple of weeks, and today the sellers were out in force, driving the Nasdaq and many leading stocks to big losses. We're not advising wholesale selling because many stocks look just fine, but you should honor your stops and make sure no losses get out of hand. We're moving our Market Monitor to a level 7 (out of 10) and will see how the market reacts from here.